Hanjin Chairman: Firm Lost a 'game of chicken' with Rivals

Posted by Joseph Keefe October 4, 2016

Hanjin's failure largest ever among container shippers; collapse has disrupted global trade networks.

The collapsed Hanjin Shipping Co Ltd could not compete against global rivals that were supported by their governments, the chairman of its parent firm told a South Korean parliamentary hearing on Tuesday.

The world's seventh-largest container shipper sought court receivership in late August after its creditors led by a state bank halted further support, stranding $14 billion in cargo and sending waves through global trade networks.

"Hanjin Shipping lost the game of chicken played among large shippers," Hanjin Group chairman Cho Yang-ho told the hearing.

"As a private company, we felt the limit of participating in a dumping war and asked for support, but I failed to convince," Cho told lawmakers.

The South Korean government has shown no inclination to mount a rescue plan for the carrier.

Hanjin Shipping is due to submit a rehabilitation plan to a Seoul court in December, although many in the industry expect it to be liquidated in the largest-ever bankruptcy in an industry battered in recent years by overcapacity and sluggish trade.

Cho said that after Korean Air Lines Co Ltd acquired a controlling stake in Hanjin Shipping in 2014, the group injected about 2 trillion won ($1.81 billion) and cut its debt-to-equity ratio to 800 percent from about 1,400 percent.

"But as foreign shippers that are supported by their governments by trillions and tens of trillions of won, flooded the market with low prices, we felt our limit," Cho said.

Cho, 67, did not name any rival shippers. However, carriers from China and Japan, to France and Germany, have received various forms of state support in recent years.

Hanjin's smaller South Korean rival, Hyundai Merchant Marine , is undergoing debt restructuring by its creditor group led by state-run Korea Development Bank (KDB), the same lender that halted support for Hanjin.

Hanjin's collapse led ports around the world to deny service to its ships as vendors refused to unload cargo for fear they would not be paid, while some ships were seized by creditors, forcing the group to inject extra money to pay for unloading, still underway.

"What pains me the most is that, due to the court receivership, many ship crews are in the middle of international waters like orphans, and I am very sorry and pained to have created a logistics crisis, but we did everything we could," Cho said.

Hanjin Group had tried to turn the carrier around after its condition deteriorated under its previous management, he added.

Choi Eun-young became the head of Hanjin Shipping in 2007 after her husband, then-chairman Cho Soo-ho, the brother of the Hanjin Group chairman, died in 2006.

Choi, who sold control of Hanjin Shipping to Korean Air in 2014, tearfully told lawmakers last month that she had "lacked expertise" in management as she had "only stayed at home" before her husband's death.